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Wind farm proposed for Boulder could power Xcel's largest customers

Xcel proposes changes to Windsource program

By Laura Snider Camera Staff Writer

Posted:
01/28/2012 09:00:00 AM MST

Updated:
01/29/2012 04:34:57 PM MST

Clarification: This article has been changed to make it more clear that the Windsource rates being proposed -- $1 per 100 kilowatt-hours for small electricity users and $1.20 per 100 kilowatt-hours for large electricity users -- is in addition to the standard rates paid by all Xcel Energy customers.

Last summer, Xcel Energy offered to build Boulder a wind farm with the provision that customers in the city would start out paying more for electricity than the utility's other customers.

Over time, if the cost of fossil fuels climbed above the cost of providing wind power, Boulder customers might actually have begun to pay less than others in the state.

Boulder leaders left the offer on the table for several reasons, including concerns that Boulder would be shouldering all of the risk in the deal and none of the control.

But Xcel Energy hasn't given up on its idea. Now, the utility -- which decided to move forward with building the wind farm anyway -- is proposing a new program to offer a deal to its largest customers that is similar to the one originally floated to Boulder officials.

This new deal, which would be offered under the existing Windsource program, "was born out of those negotiations with the city of Boulder," said Steve Mudd, who heads Xcel's Windsource program.

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"We took that same basic model and applied it," he said. "In essence, our larger customers would be able to purchase renewable energy credits and have a financial upside if gas prices go up."

Xcel has been allowing customers to buy wind power for a premium since 1997. The additional cost of purchasing wind power over Xcel's standard fuel mix -- and the way Xcel has calculated that cost -- has changed over the years, but today, customers pay about $2.16 per 100 kilowatt-hours of wind electricity over the standard rate, or about 20 percent more than most other Colorado residential customers.

Over its lifetime, the program has been popular among Boulder customers, who make up 4 percent of Xcel's customer base but about 9 percent of its Windsource customers, according to data gathered by the city of Boulder.

Even so, overall interest in Windsource has waned in recent years. Between 2008 and 2011, Windsource sales dropped 2 percent, according to paperwork Xcel filed with the Public Utilities Commission, which must approve changes to Windsource. The majority of the decline was due to residential sales, which fell 21 percent. During the same period, commercial sales increased 66 percent.

Now, Xcel is proposing two major changes to the program that the company hopes will revive interest in Windsource. The first would drop the rates for smaller purchasers, including residential customers, from $2.16 per 100 kilowatt-hours to $1, a move that would make Xcel's prices more competitive with other green energy purchase programs available in Colorado.

And Xcel will offer customers who are interested in purchasing at least 120,000 kilowatt-hours a year the opportunity to sign a five-year to 25-year contract with the utility to purchase wind power from the farm that was originally proposed for Boulder. The companies would pay about $1.20 per 100 kilowatt-hours above the standard rate to start with, but just like the proposal created for Boulder, the commercial customers may eventually get some of that money back if natural gas prices climb above wind prices.

The program also allows companies the ability to lock in a known rate for power -- or at least a worst-case scenario rate -- for a set number of years, which would create a stability that Mudd said many companies are looking for.

Xcel's application to change the Windsource program is now snaking its way through the PUC process, and several entities have won the right to "intervene" in the docket, which means they can comment on the proposal and ask questions of Xcel.

The city of Boulder, Boulder-based Western Resource Advocates, and Boulder resident Leslie Glustrom are among the intervenors.

City attorneys have not had an opportunity to fully vet Xcel's proposal, but they plan to give it a close read in coming weeks.

"The city is interested in being a part of the discussion about proposed changes to ensure that Boulder customers are represented and that any changes to the Windsource program help the city meet its clean-energy goals," said Deb Kalish, senior assistant city attorney, in a statement.

Gwen Farnsworth, Western Resource Advocates' senior energy policy adviser, said the nonprofit is still determining what its position on the proposed changes will be. But she said the proposal has some merit.

"It's good to see that they're proposing to lower the price on Windsource for their proposed new standard product," she said. "By Xcel proposing to lower the price, it's recognizing that the price of renewables is coming down, and that's a good thing. We're also hoping that it could spur more people signing up for Windsource because that could help increase investment in renewable energy."

Both of Xcel's Windsource proposals -- for the standard program and the new commercial program -- target wind power, and Farnsworth said that WRA is also interested in having Xcel create programs that would allow customers to invest in solar energy as well.

Glustrom, a longtime Xcel watchdog, said some kind of price decrease is long overdue. Glustrom has long argued that the way Xcel set its price for Windsource in the past did not reflect the true cost of adding more wind power to its system.

"Windsource customers have waited a long time for a fair price on the product of Windsource. They shouldn't have to wait any longer," Glustrom wrote in a filing she prepared for the PUC. "It is clear from data on the record in this docket that the price that Xcel is charging for Windsource does not reflect the true price of providing the Windsource product. Windsource customers have likely been overcharged for many years now. There is no need for them to wait any longer."

After a hearing in March, the PUC may make a decision on new Windsource prices as early as this summer.

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